Webb proposes ‘money safe’ pensions
Pensions minister Steve Webb has issued a challenge to the retirement industry to create products that could provide a guarantee for savers.
Speaking at an Axa conference, Towards Optimal Pension Plan Design in Europe, Mr Webb said he would reveal further details on his ‘defined ambition’ pension proposals later this year, but also suggested creating products that provide a “money safe guarantee” that promises at least the nominal value of contributions.
He said: “I am convinced people have a huge appetite for certainty about their pension savings, and this demand will drive the shape of pension provision in the future. I want industry to innovate and think hard about this.
“With the dawn of automatic enrolment the market is growing – so now is the time for pensions industry to look at the market gap in relation to affordable guarantees and provide the products consumers are seeking.
“For example one end of the spectrum could be providing an affordable ‘money safe’ guarantee where the member would get back at least the nominal value of their contributions - individual, employer and tax relief. Another could be offering an investment strategy that reduces the probability of capital loss such as NEST.
“The industry needs to move fast on this or be left behind.”
Jamie Clark, business development manager for Scottish Life, said: “There is absolutely no doubt that providing a ‘money back guarantee’ for pensions would be a positive message for saving for retirement.
“However, if pension savers start comparing their retirement income with people who have opted for a more expensive guarantee and have subsequently ended up with a higher pension fund, they could soon fall out of love.”